By David Pendered
The Atlanta Fed released Wednesday an anecdotal report of economic activity that shows the South remains a bit of an outlier in relation to the rest of the nation. The differences were both positive and less than positive as the Federal Reserve is likely to consider a rate hike next week.
Tourism is a positive in the South, according to the June 1 edition of the Beige Book:
- “Reports on tourism and business travel were positive. Florida, Georgia, and Louisiana reported strong occupancy rates at hotels and resorts. Hospitality contacts continued to report increasing capital expenditures on infrastructure as well as strong advanced bookings of hotel rooms and conferences going into the summer season.”
In tourism capitals elsewhere in the country, the news was less than positive. Particularly in New York and the Midwest:
- “In the New York District, Manhattan hotels and Broadway theatres reported lower revenues … and a retail contact notes some softening in tourism-related sales.”
Kansas City observers reported a similar dip, with little optimism for a rebound in coming months:
- “District tourism activity was strong in April but moderately weaker in May as the winter season wound down and spring storms increased. Tourism contacts expected sluggish growth for the months ahead.”
This edition of the Federal Reserve’s Beige Book is of note because it is one of the final economic indicators to be released before the Federal Reserve’s monetary policy committee meets next week. Consideration of a potential rate hike likely is on the agenda. A rate hike would be just the second since the Great Recession, following a hike in December 2015.
Rajeev Dhawan, the head of Georgia State University’s Economic Forecasting Center, has issued a report last week in which he discounted the likelihood of a rate hike.
Atlanta Fed President Dennis Lockhart told CNBC on May 5 that he was, “on the fence” about a rate hike.
Lockhart said factors important to him include the May jobs report, to be released Friday, and details of the rate of economic growth.
The anecdotal jobs report issued by the Atlanta Fed is decidedly mixed.
On one hand, businesses reported signs of a tightening labor market. Companies are adding to payrolls. Employee retention is becoming a bigger issue as workers are wooed to other firms or take other jobs. Businesses report a shortage of labor for positions both skilled and lower-skilled/entry level.
On the hand, the Atlanta Fed reported that whatever labor shortage may exist, it’s not great enough to trigger wage increases in the South:
- “Wage pressures remained muted, despite a growing expectation that compensation may have to be adjusted in the future to retain and attract workers.”
Rather than considering pay hikes, the minimum wage was the big issue business observers reported to the Atlanta Fed:
- “Employers in the Atlanta District were monitoring how recent minimum pay announcements from a number of employers would affect local labor markets.”
Elsewhere in the country, wages are rising, according to Fed reports:
- Labor shortages in the construction sector are driving up wages in the Boston, Dallas, and San Francisco districts;
- Staffing services reported higher wages in the Boston, New York, and Dallas districts;
- Restaurants and hospitality industries were reporting higher wages in the Richmond, Kansas City, and San Francisco districts noted higher wages;
- Salaries were up for IT workers in the San Francisco District, as well as in the Boston district.